Court File and Parties

COURT FILE NO.: 06-CV-321998 PD3
DATE: 2013/10/24

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: Infinium Capital Corporation

AND:

AB2000 Software Corporation, Alexandre Bevziouk

BEFORE: Mr. Justice A.J. O’Marra

COUNSEL: Catherine Powell and Daniel Stern, for the Plaintiff/Defendant by Counterclaim

J. Gardner Hodder and Stefan A. De Smit, for the Defendants/Plaintiffs by Counterclaim

HEARD: June 10-14, 17-18, 2013

COSTS ENDORSEMENT

A.J. O’MARRA J.:

[1] Mr. Alexandre Bevziouk had been in the employ, under contract to Infinium Capital Corporation (Infinium). After his employment was terminated, October 2, 2006, Infinium brought an action against him, his company, AB2000, and others for misuse of its confidential information, copyright infringement, and breach of contract. Mr. Bevziouk counterclaimed against Infinium seeking damages, initially in the amount of $3M, then increased to $30M and just before the trial of the counterclaim reduced it to $11,800,000.

[2] On April 5, 2013, Infinium discontinued the main action on consent. The trial of the counterclaim, June 10-18, 2013 was dismissed in Reasons for Judgment July 29, 2013 (2013 ONSC 5022) with costs to Infinium.

[3] The parties were directed that they could make written submissions as to costs if they were unable to agree as between themselves. I have now received the written submissions from counsel for the parties, as well as a written response by Mr. Bevziouk, all of which I take into account on the issue of costs. The following is my costs endorsement.

[4] Infinium claims costs in the amount of $299,499.35. The amount is based on Infinium’s costs from the outset of the action until May 14, 2013, the day before a pre-trial motion by the plaintiff by counterclaim, on a partial indemnity basis, and thereafter on a substantial indemnity scale. Infinium’s claim for substantial indemnity after May 14, 2013 is based on the conduct of the plaintiff by counterclaim. Infinium submits that Bevziouk and his counsel were ill-prepared, evasive and misled the court and opposing counsel, and brought vexatious motions on the eve of and during the trial. Further, Bevziouk refused Infinium’s offer to settle for $105,000 plus costs made May 30, 2013.

[5] In the alternative, Infinium seeks costs in the amount of $260,599.38 on a partial indemnity basis. Counsel submits that its bill of costs, on a partial indemnity basis does not include costs for the prosecution of its initial claim or a subsequent summary judgment motion. Nor does it include the time required for mediation or the attendance of their student to assist at trial. Further, counsel reduced the time billed by counsel who had original carriage of the action for Infinium and did not include the time required for transition between counsel.

[6] Counsel for Mr. Bevziouk asserts that because no party enjoyed any success in respect of the claims continuously asserted from the outset of the initial claim to the date of discontinuance by Infinium on April 14, 2013 no costs should flow to either side up to that date. He did submit that Bevziouk should receive costs in the amount of $5,000 for costs thrown away by him in preparation to respond to a contempt motion, which alleged breach of an injunction order. It was later severed from a summary judgment motion and never prosecuted.

[7] While I accept that there is some force to the argument that neither party enjoyed any success with respect to the claims prosecuted, it is not reasonable to assert Infinium did not enjoy success in defending against Mr. Bevziouk’s claim for $11,800,000 on the basis that Bevziouk acted with malicious intent and justifiably terminated from its employ.

[8] Pursuant to s.131(1) of the Courts of Justice Act costs of and incidental to a proceeding are awarded at the discretion of the court. The factors the court should consider, in addition to the result of the proceeding, and any offers to settle in the award of costs are set out in Rule 57 of the Rules of Civil Procedure:

(a) whether any step in the proceeding was improper, vexatious or unnecessary;

(b) the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding;

(c) the complexity of the proceeding;

(d) the importance of the issues;

(e) rates charged and hours spent for the party entitled to costs.

[9] In considering the issue of costs I am mindful that I must adhere to the principles set out by the Court of Appeal in Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3rd) 291 (CA); that the overall objective of fixing costs is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular circumstances, rather than an amount fixed by actual costs incurred by the successful litigant.

[10] With respect to offers to settle on May 30, 2013 Infinium made a Rule 49 written offer to settle the action for $105,000 plus partial indemnity costs, an offer to remain open for acceptance until five minutes after the commencement of the trial of the action. On June 6, 2013, Mr. Bevziouk replied with a counter offer to settle for $1M USD.

[11] The courts have accepted that where an action is dismissed and the defendant (by counterclaim in this instance) made an offer to settle that bettered the result, a “bonus” in the form of substantial indemnity costs to the defendant following the date of the offer and partial indemnity costs up to that date is appropriate. (See S.A. Strasser Ltd. v. Town of Richmond Hill (1990), 1990 6856 (ON CA), 1 O.R. (3rd) 243 (CA); Dunston v. Flying J Travel Plaza, 2007 819 (ON LRB), [2007] O.J. No. 4089 (SCJ).) It is, of course, a discretionary consideration depending on what is fair and reasonable in the circumstances and the costs expectations of the unsuccessful litigant.

[12] In this matter, any bonus increase to costs as result of the Rule 49 offer being beaten in the result will be offset by costs thrown away by the plaintiff by counterclaim.

[13] This was a matter of some complexity. The allegation against the plaintiff by counterclaim and the defence proffered by the defendant, Infinium was that the plaintiff inserted a malicious software code into Infinium’s main trading platform in order to have control over it, and then to secretly attempt to make use of its proprietary information and compete against it in the financial securities marketplace. Infinium was required to retain and to call experts to uncover and to delineate the complexity of the scheme enacted by Mr. Bevziouk. Considerable time and effort was required to proffer its defence in the face of Bevziouk’s claim of wrongful dismissal and breach of contract by Infinium.

[14] Counsel for Infinium has submitted that the court should consider the conduct of Mr. Bevziouk and counsel, which it claims unnecessarily increased its costs to prepare and defend the matter.

[15] Counsel submits that counsel for Mr. Bevziouk refused to admit the authenticity of any documentation, save the two service agreements at issue, or to admit most of the facts in Infinium’s request to admit, yet at trial he did not contest the authenticity of the documentation Infinium sought to admit, or dispute any of the facts previously requested to admit.

[16] Counsel submits that Mr. Hodder, counsel for Mr. Bevziouk, refused to create a joint book of documents, notwithstanding his having signed the trial management form to do so at the May 23, 2013 case conference. In an email dated May 31, 2013 Mr. Hodder asserted that he would not work on a joint book for documents unless Infinium created an index of documents for a banker box of loose documents delivered by him to counsel for Infinium. Later, Mr. Hodder agreed in the week before trial to meet with opposing counsel to discuss the organization of a joint book of documents, but then cancelled. Subsequently he refused to cooperate with a joint book of documents unless Infinium agreed to include all of the documents it might put in cross-examination to witnesses for Bevziouk.

[17] At the commencement of trial there was no joint book of documents. Mr. Hodder had four volumes containing more than 240 documents and counsel for Infinium had two volumes, many of which were duplicated. At the outset counsel sought to introduce documents as exhibits some of which overlapped causing some initial confusion as whether they were duplicates. To coordinate and control the extensive documentation the parties were directed by the court to file the documents individually, refer to them only by their exhibit number and to create an exhibits book, with tabs reflecting the document exhibit number by the end of the trial. The task of creating the exhibits book was undertaken by counsel for Infinium.

[18] I accept that the lack of cooperation by counsel for Mr. Bevziouk created some increased expense to opposing counsel requiring them to prepare a set of documents for trial as well as another set of exhibits for the court.

[19] Counsel for Infinium submits that Mr. Hodder initially prepared a trial witness list of eight potential witnesses, later amended to include Infinium’s previous counsel. At pre-trial conferences on May 23 and May 30, 2013 Mr. Hodder reduced the number of witnesses to four, for which Infinium’s counsel prepared for trial. At trial, Mr. Hodder called only two witnesses whose evidence in-chief was limited to adopting previously sworn affidavits. Counsel for Infinium submits it incurred increased costs in preparing for the witnesses not called at trial.

[20] Counsel for Infinium submits that Mr. Bevziouk initiated a number of frivolous and vexatious motions on the eve of and at the commencement of trial. On May 15, 2013 counsel for Mr. Bevziouk served on Infinium a Notice of Motion to amend the Statement of Claim: a) to sue the principals of Infinium, Alan Grujic and Sergei Tchetvertnykh personally; b) assert additional causes of action, spoliation, oppression, conspiracy, fraudulent conveyance, and breach of The Employment Standards Act; c) and increase damages claimed from $3M to $30M.

[21] In response to the spoliation claim, on May 24, 2013 Infinium served Mr. Bevziouk with additional documentary production. Then on May 27, 28, and 29 Mr. Bevziouk continued to amend the Notice of Motion which no longer mentioned spoliation, oppression, conspiracy or fraudulent conveyance, but reduced the damages being sought to $11,800,000. On June 9, 2013 a day before the commencement of trial Bevziouk amended its Notice of Motion for leave to amend the Statement of Claim to add a claim for moral damages. Leave was denied at the outset of trial. Counsel contends that the motion was a frivolous and vexatious attempt to delay the trial or to intimidate Infinium. Regardless, Infinium was required to prepare responding submissions.

[22] Counsel for Infinium also argued that Mr. Hodder had agreed not to challenge the qualifications of one of Infinium’s two experts, Dr. Christopher Stoute, yet did so with less than 24 hours notice. Mr. Hodder, in his submissions disputed that as his position. Rather, he asserted he made no promise with respect to Dr. Stoute. He contends he indicated he would not challenge the expertise of the other expert, but there “might well not be a challenge to the qualifications of Dr. Stoute”. Whether that was the position as understood by counsel I see little additional time required in order to cover the qualifications of an expert for the purpose of the court recognizing his or her area of expertise, and such was the case in this instance. The additional time expended at trial was marginal.

[23] While I have no doubt counsel’s lack of cooperation, the ambiguity of his positions, the additional motions initiated on the eve of and at the opening of the trial added to the frustration and the need of counsel to prepare accordingly, I cannot conclude that it was either vexatious or that it unnecessarily lengthened the proceedings. It should be noted that once the trial commenced, which was scheduled for nine days, it was expeditiously concluded in six.

[24] I agree with the position taken by Bevziouk’s counsel that while I did not accept Mr. Bevziouk’s evidence and concluded in particular that his evidence about having claimed commission payments during the currency of the service agreements “was an attempt to mislead the court, it is not the basis for enhanced costs” as requested by Infinium.

[25] I have examined the bill of costs of the defendant to the counterclaim, submitted on a partial indemnity basis, attached hereto as Schedule A. I am satisfied that the hours enumerated, as well as the hourly rate for the original counsel with carriage, lead trial counsel, junior counsel, clerks and student set at or below the costs grid appear reasonable in the circumstances of proceedings that took place over a six year period.

[26] In the circumstances of this case, considering the factors enumerated under Rule 57 and the overall objective in fixing costs that are both fair and reasonable for the unsuccessful party to pay, I fix the costs on a partial indemnity basis in the amount of $260,599 (inclusive of disbursements and GST/HST) payable by the plaintiff to the defendant by counterclaim.

A.J. O’Marra J.

Date: October 24, 2013